The Current - Canada's grocery sector has been plagued by in-fighting. Now it has a referee

Episode Date: January 2, 2026

Tensions between grocery suppliers and retailers came to a head during the pandemic. Karen Proud will oversee a new code of conduct meant to solve disputes and name and shame bad actors. But critics say she needs a bigger stick, like the ability to issue fines.

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This is a CBC podcast. Hello, I'm Matt Galloway, and this is the current podcast. Canada's grocery sector now has a referee. No, she's not there to blow the whistle on the skyrocketing price of butter. She won't send companies to the penalty box for selling hot dogs in packs of 10 and buns and packs of 8, but she will call out those in the grocery industry who aren't playing fair with each other. Karen Proud's job is to enforce a new voluntary, Code of Conduct that started January 1st.

It comes after the pandemic exposed deep rifts between suppliers and retailers when one grocery CEO called the relationship the worst he'd seen in his career. Karen Proud is the president, an adjudicator in the office of the grocery sector Code of Conduct, and she's with me now. Karen, good morning. Good morning, Dave. Happy to be with you this morning. Well, congratulations.

Happy New Year. How would you describe your new role? That's a good question. I think you hit the nail on the head when you called it a referee. That is part of my role. So I head up the office of the grocery sector code of conduct, which is an independent body. We're not a government organization or an industry group. We are an independent body. And my role is really to oversee and implement this new grocery code of conduct and to provide the sector. with guidance and education around the code. Now, this comes out of a need. I mean, during the pandemic, back in 2020, Michael Medline, the CEO of the company that owns Sobees, said that grocers and suppliers had, quote,

the worst relationship I've seen in my couple of decades in retail. Why was there such bad blood? Yeah, I've heard that as well. And it did give rise to the code. I think it starts with a system. where you have a limited number of grocers, as we do in this country, that hold what some would say is the balance of power when it comes to negotiations between themselves and their suppliers. And I think at the time, suppliers really felt that they didn't have

an opportunity to be able to fairly negotiate agreements with retailers and have a reasonable transparent business relationship with their customers. Can you paint us a picture? I mean, what are some examples of the practices that were causing friction between the suppliers and these big retailers? Well, it really comes down to the agreements that were in place or not between suppliers and their retailers. And that's where the code really tries to set out a framework about what these agreements

are supposed to look like. The concerns were around the fact that even if you had an agreement in place, the terms of those agreements could change overnight without any ability to discuss or negotiate. Suppliers raised concerns about sort of fees and deductions that would come out a left field that they had not previously agreed to. There were concerns about when products get delisted, whether there was any notice. So those sorts of things where these unilateral decisions were being made, where suppliers didn't have an opportunity to discuss or influence how their trade agreements were going

to roll out. So how's it going to work? What happens if someone has a beef with the other side? Well, so the code very much emphasizes the needs. for agreements between suppliers and retailers to lay out all aspects of the trade agreement or all aspects of the commercial agreement. That's the first step. And, you know, if there are disputes with regards to agreements that are in place, if things

are in agreements, you know, that's what the parties have agreed to. And so the office won't necessarily play a role. but when things arise, if there are things in agreements that are contrary to the code or if there's issues that come out that are not within the agreements, they can come to me and my office to ask for us to help. And we do that in a number of ways. So ultimately filing complaints would be one of those ways. I mean, we've got five big grocery retailers, Loblaws, Sobies, Metro, Costco and Walmart. They control 76, percent of the market. What would motivate a supplier to file a complaint considering the big

five's control of the market? That's a great question. And it's something that we heard early on about concerns from suppliers about raising issues with their large customers who they depend on. And so the office has established a process whereby any one of our members, suppliers or retailers can raise confidential concerns with our office. And if we look into those and see that they are valid sort of systemic issues that are happening with regards to the code, we can then follow up with the other party. And the other party doesn't necessarily know who has filed those complaints. So the office is able to address some of these issues without parties knowing who have raised complaints. We do have a more formal dispute resolution.

mechanism in place. But that's where parties will be known to each other, and it goes through a very formal process at the end of which there's an adjudication and a decision and a public reporting as to whether or not the code has been breached. How effective do you think you can be without the ability to fine the bad actors? Well, that's an area that's, there have been a lot of questions about, you know, this is a voluntary code. And so do we have any teeth or do we have any sticks to use? And frankly, you know, I think we can be quite effective. I would bet that a lot of suppliers or retailers,

because this is a reciprocal code, would much rather pay a fine than see their name in print in a public report from the office saying that they weren't complying with the code. And so we do have that ability to report publicly on issues that we're seeing with the code, on instances where there's been a breach of the code. And that's a very, very effective tool when you think about how company reputation is just so important to these large companies. Now, I know this isn't the focus of your mandate, but what impact, if any, could your role have on bringing prices down for Canadians who are really feeling the pinch at the checkout counter? Yeah, there has been a lot of misinformation in the past about somehow the code is going to be this

silver bullet to deal with food inflation or reduce prices. And the code was never designed as such. It's really about improving those business relationships between suppliers and retailers. That said, if we are able to create a more transparent environment, a better business environment in this country, in this grocery. sector, we hope to see more investment in this country, more innovative products being brought onto the grocery shelves. We're hoping that it will address some of these supply chain issues that can affect pricing or volatility in pricing. And so the consumer at the end of the day may see some of these benefits, but I would hesitate to say that they're going to see any change

in pricing or inflation due to this code of conduct. In terms of solving the disputes between retailers and suppliers, I mean, this code of conduct is self-regulated, and part of the aim is to avoid government regulation. You're going to be filing reports. What would it take for you to ask Ottawa to step in and legislate? If the office found that the code was not working, and so if, if, If those that have joined the code and are committed to the code are not abiding by its provisions, are not listening to the advice of myself and my office, are not playing by the rules laid out in the code, that would trigger reporting from us indicating concerns with the code. There's a step.

There's a process in evaluating the code after its first year to see whether the provision. within the code are actually effective. And so I think we would probably start there before we ask government to step in to see if we need to enhance the code or change some of the code provisions. But ultimately, if our office feels that the code is just not working

and it's not getting the results that we had hoped, we will be brutal in our reporting and our ask of government then to step in. Karen, I want to say thank you and good luck. Thank you very much. That's Karen Proud, President and Adjudicator in the Office of the Grocery Sector Code of Conduct.

Ladies and gentlemen, one of the great Canadians. Oh, here you are. You're here and we're here. No matter what race you were, what color you were, what religion you were, what language you spoke, you watched Mr. Dressup. The Tickle Trunk was this magical like Pandora's Box. I'm talking about Captain Dressup.

Mr. Dressup. The magic of make-believe. You've made me what I am today. You know that. Watch free on CBC Gem. The goal of this code is to promote fair dealing in the grocery industry and help even out the competition. But some are concerned a voluntary code won't be enough to get grocery retailers and suppliers to play nice. Fast Bednar is the managing director of the Canadian Shield Institute, a non-partisan independent policy think tank.

She's also co-author of The Big Fix, how companies capture markets and harm Canadians. She's in our Toronto studio. Fas, good morning. Good morning. What do you make of this code? And can it be successful? I think it can be successful.

I mean, it's a long time coming, started in 2021, right? Actually, a big federal study was done looking at fees in the grocery sector. And that's when a working group kind of said, we need to do something more about this because the fees were escalating and kind of getting, you know, a little bit out of control. And these are things that the consumer doesn't see. No, it's invisible to us. So when Karen says that, you know, it's unlikely to change the price of food, these costs get passed on to someone. So either the suppliers eating them or, you know, we're kind of absorbing them as consumers.

But what the code doesn't do is question the norm of these fees as the cost of doing business in the grocery sector. as well, right? Late delivery fees, out of stock fees, fees to unload, marketing fees, early payment discounts. It does add up. So it's a norm. But are these junk fees, right? Are these, you know, will the code change the fees? No, what the code is helping us do is saying if you're a supplier and I'm a retailer, that I can't just arbitrarily change our agreement and jack up prices. or some of what I've read, and I mean, this is not my original research, this is me reading Reddit comments, is, you know, people having experiences, or actually there was a good Toronto Star story that went deep into this, having experiences where their product was in one grocery store,

but that chain owned many other ones. So suddenly the grocery store decides to also shelve it instead of just at 14o, say also at no frills, which they also own, and then passes on a bill for that to the supplier and they're smaller and maybe unable to anticipate or absorb that. So to the transparency piece, huge potential. Let's have more transparency with these fees and help suppliers negotiate effectively. At the end of the day and at the checkout counter, what's it going to mean for consumers do you think? Look, I'm looking forward to the annual report. I think, you know, the ultimate test of if this code works and matters is are suppliers comfortable and confident, even using this confidential arbitration system to speak up and out. Do people recognize

what's an abuse of market power versus just, again, what's being passed on or told is the norm of doing business? Do I think we could do other things to moderate this marketplace? Yes, but I think if we put the Code of Conduct in kind of that landscape of like a suite of interventions. It becomes more something we should be proud of and not totally roll our eyes at, though I've rolled my eyes at it before. As we heard from Karen Proud, the goal of this code is to improve the relationship between retailers and suppliers. Why have suppliers felt that they've historically gotten the short end of the stick? I mean, Karen alluded to it, right? The consolidation of our grocery system here. You mentioned it as well. Suppliers lose their power,

lose their bargaining power, lose choice. If you lose access to a marketplace because you have an exclusive agreement with a company like La Blah, that can put you out of business. So you're not in, it's not about a power position, but it's not a level, hasn't been a level playing field. And yes, in the pandemic, we saw things like these late fees, right, when we were having all these supply chain disruptions and challenges with deliveries, independent, smaller suppliers. were being penalized for a truck coming, you know, one or two days late and paying a fine for that. And that seemed kind of egregious. If part of this is about fair dealing, will this code make it easier for independent suppliers to get their products on the shelves, do you think? It's still expensive to get your products on a shelf.

And where on the shelf also matters, the code doesn't address this kind of fundamental structural reality. the marketplace, which is not just that we don't have tons of grocery stores in Canada. It's that increasingly grocery stores own and operate within that marketplace. So you are competing, often, directly with a private label brand that is owned by that parent grocery store company. Like a no name or a... Precisely. You got it. President's choice, say, for example. So market wise, you're now competing with a firm with a product that doesn't have to pay the shelving fee. fees, doesn't have to pay all the fees as you. And because you are in that marketplace,

the parent company, the grocer, knows all sorts of things about you. Your prices, who's buying your cans of soup, what demographics they are, right? If they're participating in the loyalty program, the geography in Canada of where your product is popular, that's a lot to give up. So the price of participating in the marketplace isn't just the fees and the tolls, which I think personally, a lot of them are kind of junky. It's that loss of privacy, right? You're giving up all this market, competitive market intelligence just by being on the shelf. You think this is going to change our experience at the grocery store in any way? No, I don't think it's going to change our experience, but I do think we've seen, especially last year, we've been reminded of people power,

right? Consumer power, the choices we make are powerful. I do think Canadians will be curious about the relationship between brands that they like and, you know, suppliers and retailers and that the naming and shaming could be powerful and could be, you know, could potentially be a deterrent. There's a case I've, I was following in the U.S. that the FTC was going to hear in full between Walmart and Pepsi. And basically, so that's, you know, we have a Walmart, we have Walmart in Canada and we have Pepsi in Canada. So do we think that this kind of arrangement doesn't also exist here, but basically they had an exclusive arrangement to give Pepsi preferential pricing and would monitor to make sure that no one else had Pepsi at like a

particular low price. So it's not just about things being more expensive. It's also about who gets to be offering, who can afford to offer discounts or who can afford to, yeah, have lower priced goods. That changes the experience. You've spoken publicly about wanting federal legislation to deal with some of these issues. What would you want to see? So there's a piece of legislation in the U.S. It's from like 1936. It's called the Robinson Patman Act. And it was being revived a little bit under former FTC chair, Lena Kahn. It seeks to target buyer power more directly by, you know, kind of saying you can't price discriminate with the largest suppliers by offering them massive bulk discounts that no one else can access, right? So I think

a Robinson Patman Act for Canada could be novel, could be interesting. The U.S. also, you know, Europe has guidelines that discourage things like excessive slotting fees. So again, if we wanted to target some of those fees more directly and help cap or curb their growth, I think that could be powerful. What other questions should consumers be asking when making purchase decisions? What other questions? I mean, there's the whole loyalty aspect around, you know, surveillant pricing and the information we're sharing about ourselves and our consumption

and our purchasing habits. I think we should do our best to look at all the shelves, not just the shelves that tend to be eye level or the special edge shelves. These are like high, you get charged more. It's called cap, the cap of the aisle, recognizing the hurdle, what it takes to actually get in a grocery store in the first place and maybe switch up some of what we're buying from like the bottom shelf because, yeah. And be aware of the dynamics that are the things that are putting things at our eye level.

Exactly. I think that could be helpful. That's a good thing to do. All right. Well, we'll be watching how this code of conduct does or doesn't. affect the consumer experience and that of the retailers and suppliers. Fass, thank you. Thank you.

Fass Bednar is the managing director of the Canadian Shield Institute, a non-partisan independent policy think tank. She is also co-author of The Big Fix, how companies capture markets and harm Canadians. You've been listening to the current podcast. My name is Matt Galloway. Thanks for listening. I'll talk to you soon.

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